Property Rights

Corporate Welfare and the California GOP

How Golden State Republicans undermine property rights and support eminent domain abuse

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We all know that California's Democratic Party is running the state into the fiscal ground, given how beholden its members are to public sector unions and how devoted they are to expanding government and raising taxes. The state needs some political competition, but a major court case reminds us why the state Republican Party is a useless vessel that's incapable of broadening its base and changing the state's political trajectory.

Last Thursday, the California Supreme Court began oral arguments in a lawsuit brought by defenders of the state's redevelopment agencies (RDAs) who are seeking to overturn recent laws that essentially shut down those agencies. Gov. Jerry Brown isn't often right, but he was on target when he proposed shutting down these central planning agencies that primarily dispense corporate welfare to big businesses and drive small property owners off their land so that big-box stores can prosper.

Brown's plan wasn't perfect. It allowed the agencies to buy their way back into existence as many of them have since done. The law wasn't passed entirely for the right reasons. Brown and legislative Democrats had typically supported RDAs, but were looking for quick ways to close the state's gaping budget hole. As Bloomberg reported, "The governor and supporters of the law said the redevelopment agencies have become little more than slush funds for private developers, and they want the tax money generated by new developments to be diverted from the agencies to local schools, law enforcement agencies and other services."

When your political enemies give you a gift, you ought to take it. Instead of taking it, California Republicans actively opposed the governor's plan and shamelessly sided with the people who run roughshod over everything the GOP is supposed to stand for. Forget all the talk about property rights, limited government, free markets, and family values.

"Almost like in Alice in Wonderland where up is down, and down is up, this past year Democratic Legislators voted to abolish redevelopment and most Republicans fought tooth and nail to protect 425 redevelopment agencies from being abolished!" explained Jon Fleischman, California GOP vice chairman and publisher of the GOP-oriented Flashreport. Fleischman noted that over two crucial votes, only six Assembly Republicans voted to abolish RDAs and only one Senate Republican voted to do so. This indeed is shameful.

In fact, one of the GOP's leaders, Sen. Bob Huff of Diamond Bar, received the League of California Cities' Legislator of the Year award for his efforts to save redevelopment agencies. His wife, by the way, works for a developer who is one of the state's biggest redevelopment beneficiaries. This is the type of thing that makes me want to join the unbathed wretches occupying city parks. In the thick of the debate, I recall talking to multiple Republican legislators and most of them were defiant defenders of redevelopment. They said that it worked in their city. They championed the economic benefits of redevelopment. It became clear that with the exception of Chris Norby of Fullerton, Beth and Ted Gaines of Roseville, and a couple others, Republicans don't even understand the nature of free markets.

Started in the 1950s to combat urban blight, redevelopment has become a tool by which localities maximize tax revenue within their boundaries. In the redevelopment process, local bureaucrats identify areas that they want to see improved. The agency declares these areas blighted based on a wide-ranging set of criteria. Basically, if officials want to redevelop an area, the well-paid consultants will always find blight.

Then within that area, property rights magically disappear. City officials call the shots. They can and often use eminent domain to clear away properties and hand them over to politically well-connected developers who promise to build tax-generating projects. Even when cities don't use eminent domain, the threat of its use is enough to cause small business owners and even homeowners to flee. Then the agencies run up debt to fund the projects. In Sacramento recently, a restaurant developer received millions of dollars in subsidies to build a mermaid bar—mermaid-costumed women swim around in a giant fish tank—that caters to lobbyists. How's that for a core government service?

Of course, most of the claims by redevelopment's advocates and beneficiaries of new jobs are bogus. The nonpartisan and highly respected state Legislative Analyst's Office found, "While redevelopment leads to economic development within project areas, there is no reliable evidence that it attracts businesses to the state or increases overall regional economic development." LAO debunked the absurd job-creation claims made by the California Redevelopment Association.

Mostly, redevelopment shifts jobs around a region as localities fight with one another to lure the businesses in a mad rush for tax revenue. They have to find some way to fund those lush city manager salaries and police pensions. This may be pro-business in a way, but it's the sort of anti-market, bailout, subsidy-driven philosophy that is angering Tea Partiers and Occupiers alike.

The state Supreme Court case centers on Prop. 22, the November 2010 statewide ballot initiative that banned fiscal raids on redevelopment funds. That's why the governor's approach was to shut down the agencies in their entirety and then allow some of them to come back into existence. As the state argued, "RDAs are creatures of statutes—and their existence is not guaranteed in the state Constitution—so the Legislature was free to dissolve them."

Republicans should be standing with the small property owners and business people—often working-class people and minorities—who want to pursue their dreams and not be bullied by these urban-renewal agencies. They should be standing up for fiscal responsibility and against debt and subsidies. Instead, they have stood up for the Armani-suit-wearing developers and bean-counting bureaucrats who treat private property like pieces on a monopoly board. It's shameful and a reminder of why the GOP is dying in California.

Steven Greenhut is editor of www.calwatchdog.com.

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  1. RDA’s are a fucking disgrace. It is always fascinating to contrast private development projects with RDA projects. In my experience, the RDA projects are never meant to maximize stakeholder wealth, but are instead designed to fulfill a social/political agenda. Contrast Macerich’s redevelopment of Santa Monica Place (beautiful project), versus this turd-by-the sea by DDR in Long Beach. I write this as a commercial real estate guy, too. The best projects are always the result of free-enterprise; i.e. projects developed to fulfill market needs. RDA’s ignore market signals, and it shows in the miserable, often failing, products. RDA developments then turn into a continuing burden on city’s and taxpayers, because no RDA or city councilman ever wants to admit that the project is a failure.

    1. My old home town was stuffed to the gills with successful shopping centers and one failed one. Who would like to guess which one resulted from government urban renewal?

  2. With apologies to the CRE guy above me, one big problem is that the politically active “business community” is weighted towards real estate developers, financiers, and construction contractors.

    Those guys want transactions and don’t care how they get them.

    1. So, taking government favors and using government muscle against competitors is in their self-interest?

  3. http://www.change.org/petition…..l-security

    Maybe if enough people sign it we could finally see what America wants.

  4. “…Republicans should be standing with the small property owners and business people?often working-class people and minorities…”

    This is a joke, right? A “pro-business” republican is someone who favors subsidies, favors and giveaways to connected insiders and family members. It always has meant that. Anyone questioning them is automatically labeled an anti-business communist. And it’s this that’s part of the reason no one seriously trusts corporate America and the “free” enterprise they promote.

    1. Government’s sole purpose is to perpetuate itself. Doesn’t matter if you are a Republican or a Democrat.

      Begs the question, if there was a strong libertarian party, equal in political strength to the big two, would they eventually be corrupted by power into forsaking their core beliefs of limited government?

      Can one who believes in limited government be expected to limit their own power?

      1. …would they eventually be corrupted by power into forsaking their core beliefs of limited government?

        Maybe. But what a nice dilemma to have, right?

      2. Begs the question, if there was a strong libertarian party, equal in political strength to the big two, would they eventually be corrupted by power into forsaking their core beliefs of limited government?

        the answer is “yes”. If you wanna be optimistic, it might take them 20-40 years to get there, if they were granted the opportunity.

  5. Basically, if officials want to redevelop an area, the well-paid consultants will always find blight.

    This, and it is by no means limited to California. Central planners have a knack for declaring healthy but politically powerless neighborhoods “blighted” and then replacing them with real blight.

  6. The California GOP rank and file, across the board, overwhelmingly want to get rid of Redevelopment Agencies. Yet so very many GOP legislatures voted to keep them. Pruf that Sacramento warps the mind.

    I think the key is “Jerry Brown”. The way stupid California politics are, the GOP legislators reflexively oppose anything the governor is for. If Jerry wanted to adopt a homeless kitten, the GOP would have a conniption fit over it.

  7. It sounds like this wasn’t about abolishing RDAs so much as taxing them. They pay a hefty amount to get back into the system and continue as usual with taking homes, right? If I understand correctly, it seems the only clear libertarian response is a generalized disgust.

  8. What is awful is that the Democrats are worse.

    1. 100% correct – much worse, they control every major Redevelopment Agency in CA.

  9. Maybe the republicans opposed the governor so that they could build support. Cutting any program is unpopular, so if the democrats are for it, the republicans should be against it in order to endear themselves to the public.

  10. Steven, some watchdog you are …this article on the GOP and Redevelopment was not based on reality.

    I have fought Redevelopment for many years. I was trained by the Institute for Justice in Washington DC (The Organization that took the Kelo case to the SCOTUS). I have been succesful in stopping a couple of major projects prior to the Kelo decision. In every city that I have fought in it was Democrats laundering campaign money through BILLIONS in no-bid public works contracts.

    Democrats love to take someone’s property and hand it to their campaign contributors, even if they are “Republicans” because they will also donate to Democrats if it means millions in no-bid corporate welfare projects.

    Take two of the state’s largest Redevelopment Agencies – the City of San Jose and Sacramento for example; every major hotel, restaurant, martini bar and “loft” condo developments in Redevelopment zones was paid for by the tax payers (taken at gunpoint. Each of those cities is completely controlled by Democrats.

    In Sacramento, the City seized parcels through eminent domain – paid over $10 Million with tax payers dollars – then GAVE the land AND $12 Million in construction funds to build a pizza joint and a bar for a big campaign contributor. This is but one of HUNDREDS of examples of how the Democrats launder campaign funds.

    If indeed you are as “unbiased” as you claim, you seriously need to educate yourself before spouting off.

    BOTH parties are dirty when it comes to Redevelopment – In my personal experience – the Democrats benefit much more than the GOP does in California because they control the vast majority of RDA’s.

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